Defining poverty

Yet the welfare groups and academics press on as if nothing had happened. The Senate Committee’s poverty estimates, for example, totally disregarded the problems in the income data despite being alerted to them by the CIS submission. Similarly, a recent report by the St Vincent de Paul Society claims that nearly a quarter of the population is living in households with a weekly income below $400, but this takes the income data at face value as if the ABS had never issued its warnings. And my namesake at the Social Policy Research Centre (“the other Peter Saunders”) has just produced a book with the stated aim of “restoring credibility to Australian poverty research” in which he devotes just two sentences out of 155 pages to the problems in the income data. Like the three monkeys, the Senate Committee, the Vinnies researchers and the “other” Peter Saunders apparently hear, see and speak nothing about this core problem. Presumably they hope we will all just forget about it.

Given the confusion around the concept of poverty, and the inadequacy of the income data, I sometimes wonder whether it is worth persevering with the notion of “poverty” applied to the Australian context. However, there clearly are some people who live lives of material (and often cultural and spiritual) deprivation in this country, for whom the term may still be appropriate. But if we insist on retaining it, two points need to be made very clear.

The first is that the number of “poor” people is nowhere near the sorts of figures bandied around by the welfare lobby - I would estimate no more than 5 per cent of the population, probably less. Research on various indicators of “hardship” (such as being unable to afford heating at home, or having to pawn or sell something to raise cash) suggests around 3 per cent of the population are experiencing difficulties like these. Longitudinal research on low incomes (less than half the median) finds fewer than 4 per cent remain under this level for three successive years (for most people on low incomes are in transit to something better). For these and other reasons, I think the problem of serious deprivation is relatively small, and this makes it manageable.

The second point is that “poverty” or “hardship” is not simply, or even primarily, a matter of low incomes. Research on “hardship” has found that the great majority of households on the lowest incomes report no hardship, and that half of the households that do report hardship are on incomes above the conventional half-median “poverty line”. The only explanation is that most people on low incomes manage to “get by”, and that those who suffer do so because of the way they handle their money and organise their lives. Although the poverty lobbyists refuse to recognise it, there is a significant “behavioural” component to what they call “poverty”.

This is borne out by looking at the level of welfare benefits paid to people with no other source of income. For many years the Melbourne Institute has been updating the (extremely generous) “Henderson poverty line” and comparing it with the income available from welfare benefits. With the sole exception of a single person on unemployment allowance, every type of household on every type of benefit is entitled to an income that puts it above the Henderson line. If there is a deprivation problem, therefore, it is not one that is going to be solved by increasing welfare benefits.

So what should be done? Where possible, we should aim to get people into paid work, for everyone agrees that a full-time wage is the best guarantee against “poverty”. This means enabling people to work (for example, by expanding child care, providing training opportunities, and so on) as well as requiring them to do so (by tightening up the welfare eligibility rules). It also means stepping up intensive assistance for the “hard cases”, just as the Americans have done. What we must not do is what the welfare lobby keeps demanding - increase welfare spending.

One of the greatest ironies of the poverty debate in this country is that the activists and academics who keep insisting that poverty is a huge and growing problem also argue for more welfare spending to solve it. But if welfare was the solution, the “poverty” of which they complain would have disappeared long ago, for government spending on income support has grown from 3 per cent to 8 per cent of GDP in the last 40 years. Whatever else we take from this debate, let’s all agree to stop pursuing policies that have patently failed to work.